Quant MF Debt Funds

Quant Debt Funds invest in debt and money market instruments. These funds provide investors with regular income and safety of capital. These funds are ideal for conservative investors who have an investment horizon of around 5 years.

Investment Objective

Quant MF Debt Funds aim at providing investors with regular income and safety of capital over the short to medium term. These funds invest in fixed income generating securities like treasury bills, government securities and other money market instruments. Each of the debt securities bears a specific credit rating which is assigned by a rating agency. These ratings help to gauge the reliability of the issuer with respect to repayment of principal and interest upon maturity. The fund manager will choose the debt securities based on the underlying ratings and investment objective of the fund. A debt fund investor would earn returns by way of interest income and steady increase in the fund value over the given investment horizon. However, the Quant MF Debt fund doesn’t guarantee that the investment objective will be achieved.

Risks Involved

Quant MF Debt funds carry low to moderately high market risk as compared to equity funds. The fund value may go up / down as and when the price of underlying debt security changes. The price of debt securities might be affected by the level of interest rates, government policies, tax laws and other economic developments. An increase / decrease in the overall interest rates may lead to fall / rise in the price of the debt security. The extent of risk also depends on portfolio duration and average maturity. Longer duration Quant MF Equity funds possess higher market risk than short-duration debt funds. Similarly, low-rated debt funds will have higher market risk as compared to high-rated debt funds. Investors may consider their own risk tolerance before investing in a scheme.

Return Potential

Returns are incidental to the risk assumed by an investor. Quant MF Debt funds generate higher returns as compared to traditional fixed income investments. Historically, these funds have known to deliver average returns of around 7%-10% over a period of say 5 years. The level of returns depends on credit ratings and duration of the debt funds. Low-rated funds like Credit Risk Funds offer higher returns to compensate for the high risks involved. Conversely, high-rated funds like Corporate Bond Funds offer relatively lower returns on account of low risks involved. Similarly, long duration funds like Gilt funds offer higher returns than short duration funds. However, Quant MF Debt funds do not guarantee assured returns and the fund performance may vary from one period to another.

Who should invest?

Quant MF Debt funds are suitable for conservative investors who are seeking capital appreciation and regular income over a period of say 5 years. As these funds are relatively stable as compared to equity funds and may lend stability to an equity-oriented portfolio. Those who seek high liquidity from their investments would find liquid funds highly suitable. The dividend option available in Quant MF Debt funds can help you to supplement your overall income. Long term investors who fall in higher tax brackets may find debt funds as the tax-efficient investments. The long term capital gains upon redeeming the units of debt funds receive the benefit of indexation and are taxed at the rate of 20%.